Tag Archives: Orange County Housing

Orange County Housing Report:“Too Much Noise”

Orange County Housing Report March 15th, 2018

Everybody seems to have an opinion about the direction of the housing market.

Ignore the Noise: From talk of a housing bubble to speculation that the market will slow because of higher rates, the best advice is to ignore all of the noise and turn to the facts.

Wow! There is a lot of talk and speculation about the housing market these days. Some people are convinced that housing is a bubble and it will implode, dropping more than it did during the Great Recession. Yikes, interest rates have reached 4.5%, it must mean the end of the housing run is near. On a live video, one real estate professional warned that the market will turn this autumn stating that a downturn occurs every 10-years. Some speculated that the new tax law would affect the luxury market negatively.

From recent volatility in the stock market to the looming trade wars, there is a lot of uncertainty out there and it has been spilling over to housing. Is a housing downturn around the corner? Will the market finally favor buyers? The answer is simple, not anytime soon. Ignore all of the noise.

There is no major, upcoming downturn larger than the Great Recession. Interest rates would have to rise beyond 5.5% to negatively impact housing. No, real estate recessions do not occur every 10 years like clockwork. The new tax law is not impacting the luxury market. Stock market volatility and the trade war are not influencing housing. It is all just noise.

Some of the buzz may originate from wishful thinking. For others, it may be fear generated from the uncertainty that swirls around the modern economy. Yet, all of the clamor is not based on the facts. Quite simply, nobody can ignore the data. It is a seller’s market with ZERO indicators, or trends, that the market is going to turn in the buyer’s favor anytime soon.

FACT – It is a HOT seller’s market with an expected market time of 55 days. Any time the expected market time, the amount of time it would take for a home on the market today to be placed into escrow, falls below 90-days, it is a seller’s market. When it falls below 60 days, it is considered a HOT seller’s market, one that is pumping on all cylinders and leaning heavily in favor of sellers. Crowded open houses, multiple offers, buyers seemingly tripping over each other to purchase, that has become a springtime norm for Orange County housing and it is no different today.

FACT – In the past 15 years, today’s active inventory is at the second lowest level behind 2013. For the market to start tipping in the buyer’s direction, the inventory needs to rise above the long-term average of 8,000 homes for a sustained period of time. Not just exceeding 8,000 homes for a month or two; instead, it must remain elevated for years. During the Great Recession, the inventory exceeded 8,000 homes for six years. The active listing inventory is currently at 4,420 homes and does not look like it will come close to even touching 8,000.

FACT – More luxury homes have sold so far this year than ever before. Through the first two months of the year, there have been 444 closed sales above $1.25 million, a new record. Last year, the prior record, there were 430 closed sales, 3% fewer. So far, the new tax law has had zero impact on the trend in a record level of closed luxury sales.

FACT – The supply is low and demand is high. One cannot ignore basic supply and demand from Econ 101. When very little supply, a nine-year trend, is matched with very hot demand, a six-year trend, prices rise. Even though interest rates have risen to 4.5%, current rates are still low in historical contexts, making homes more affordable. This is precisely why the rise in interest rates has not adversely affected the market. Instead, it has pushed more buyers to buy before rates continue to rise.

FACT – A lack of homeowners coming on the market, especially below $750,000, is starting to eat into the number of closed sales. When there are fewer homes to purchase, sales go down. The headlines this year are going to report that sales are down and prices are up. That does not mean that the market is slowing. Instead, it means that the lack of entry-level homes coming on the market will make purchasing within this range even more challenging than prior years.

The bottom line is this: facts and data do not lie. Buyer, seller, and all consumer expectations should really be anchored in fact, not the noise of rumors, opinions, or uneducated guesses. The housing market is hot and it will remain a seller’s market for the long run.

Active Inventory: The active inventory increased by 6% in the past two weeks.

Across the board, in every price range, the active inventory increased. In the past two weeks, the inventory added 242 homes, a 6% increase, and now totals 4,420. Even though demand is hot and there are very few homes on the market, they are not instantly being placed into escrow. This is partly due to the fact that it takes a bit of time to market and negotiate a sale, even in a fast pace, seller’s market; HOWEVER, there are still plenty of homeowners aggressively pricing their homes, stretching the value too much. These homes are starting to accumulate on the market without success. Today, buyers are willing to stretch in price a bit, but they are not going to get carried away, as values are already high. Alternatively, sellers should price their homes carefully, adhering to their Fair Market Value. When a home is priced right, it will procure multiple offers, allowing a seller to pit the offers again each other. This often results in a sales price at, or even above, the asking price.

Last year at this time, there were 4,571 homes on the market, 3% more than today. The year over year difference has slowly been diminishing.

Demand: Demand dropped by 1% in the past two weeks.

Demand, the number of new pending sales over the prior month, decreased by 24 pending sales over the past couple of weeks and now totals 2,417, a 1% drop. Year in and year out, demand typically pauses for a brief moment at the beginning of March, strange annual phenomena. After “springing forward” this weekend, there will be more daylight to work with and the Spring Market will accelerate. Demand will increase dramatically from now through April and will peak sometime between April and May.

Last year at this time, demand was at 2,576 pending sales, 159 more than today, or 7%. The number of pending sales has dropped this year because of a serious lack of inventory of homes priced below $750,000. As a matter of fact, there have been 12% fewer homes that have come on the market below $750,000 so far this year. This lack of affordable housing has seriously undermined potential demand.

The expected market time, the amount of time it would take for a home that comes onto the market today to be placed into escrow, increased from 51 to 55 days in the past two weeks, still a hot, seller’s market. Last year at this time, the expected market time was at 53 days, very similar to today.

In the past two weeks, demand for homes above $1.25 million decreased from 354 to 343 pending sales, down 3%. The luxury home inventory increased from 1,629 homes to 1,704, up 5%. From here, expect both demand and the inventory to rise throughout the Spring Market. The current expected market time for all homes priced above $1.25 million increased from 138 to 149 days over the past two-weeks.

For homes priced between $1.25 million and $1.5 million, the expected market time decreased from 79 to 78 days. For homes priced between $1.5 million and $2 million, the expected market time increased from 115 to 149 days. For homes priced between $2 million and $4 million, the expected market time increased from 167 days to 193. In addition, for homes priced above $4 million, the expected market time decreased from 515 to 338 days. At 338 days, a seller would be looking at placing their home into escrow around the February 2019.

Orange County Housing Market Summary:

The active listing inventory increased by 242 homes in the past two weeks, up 5%, and now totals 4,420. Expect the inventory to increase from now through mid-Summer. Last year, there were 4,571 homes on the market, 151 more than today.

There are 24% fewer homes on the market below $500,000 today compared to last year at this time and demand is the same as last year. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly disappearing.

Demand, the number of pending sales over the prior month, decreased in the past two-weeks by 24 pending sells, down 1%. The average pending price is $900,305.

The average list price for all of Orange County remained at $1.8 million over the past two weeks. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.

For homes priced below $750,000, the market is HOT with an expected market time of just 33 days. This range represents 35% of the active inventory and 58% of demand.

For homes priced between $750,000 and $1 million, the expected market time is 43 days, a hot seller’s market (fewer than 60 days). This range represents 17% of the active inventory and 22% of demand.

For homes priced between $1 million to $1.25 million, the expected market time is 82 days, a slight seller’s market (between 60 and 90 days).

For luxury homes priced between $1.25 million and $1.5 million, the expected market time dropped from 79 days to 78. For homes priced between $1.5 million and $2 million, the expected market time increased from 115 to 149 days. For luxury homes priced between $2 million and $4 million, the expected market time increased from 167 days to 193 days. For luxury homes priced above $4 million, the expected market time decreased from 515 to 338 days.

The luxury end, all homes above $1.25 million, accounts for 38% of the inventory and only 14% of demand.

The expected market time for all homes in Orange County increased from 51 days to 55 in the past two weeks, a hot seller’s market (fewer than 60 days). From here, we can expect the market time to remain below 60-days through May.

Distressed homes, both short sales and foreclosures combined, make up only 1% of all listings and 1.4% of demand. There are only 14 foreclosures and 30 short sales available to purchase today in all of Orange County, that’s 44 total distressed homes on the active market, rising by four in the past two weeks. Last year there were 77 total distressed sales, 77% more than today.

There were 1,820 closed residential resales in February, down by 4% from February 2017’s 1,888 closed sales. February marked a 1% increase from January 2018. The sales to list price ratio was 97.6% for all of Orange County. Foreclosures accounted for just 0.9% of all closed sales and short sales accounted for 0.7%. That means that 98.4% of all sales were good ol’ fashioned sellers with equity.

Orange County Housing Report:“The 6-Year Drought”

Orange County Housing Report February 27th, 2018

There have been far fewer homeowners selling their homesannually ever since the start of the Great Recession.

Lack of Sellers: In the face of massive home appreciation and excellent conditions that have favored sellers for years now, fewer homeowners are opting to sell.

In 2009, the midst of the Great Recession, a trend emerged. Fewer sellers were coming on the market. It made sense back then; homeowners watched their home equity evaporate overnight, so why would homeowners trip over themselves to sell in the middle of a tumultuous, deep buyer’s market? As a result, from 2009 through 2011, 22% fewer homes came on the market each year compared to 2000 through 2008.

In 2012, the housing market turned around, tipping in favor of sellers for the first time since 2006. Even though it was a seller’s market, the trend of fewer homeowners opting to place their homes on the market not only continued, it deepened. For the past six years, from 2012 through 2017, the number of homeowners coming on the market annually dropped from 22% fewer to an average of 31% fewer. To put it all in proper perspective, there were 1,500 more homes coming on the market every single month from 2000 through 2008. That is an additional 18,000 homes per year.

Today’s buyers would love to see more inventory. It is frustrating to be a buyer. With a lack of inventory and backed up demand, properly priced homes generate a parade of showings, open houses with buyers bumping into each other, and multiple offers (and in some cases, almost too many to count).

The lack of inventory is no longer a trend. After 9 years, it is a norm, a way of life in the trenches of real estate. A lack of inventory is not just a standard in Orange County; it is the new standard across Southern California, the entire state of California, and across the United States. People are no longer selling and moving like they did before.

Based upon 2017 closed sales, the turnover rate for the Orange County housing stock is once every 20 years. That is an improvement over 2016’s once every 21 years, 2015’s once every 23 years, and 2014’s once every 24 years. Although it may be slightly improving, once every 20 years is a long time to hold onto a home before opting to sell.

In 2017, the markets with the best rates were mainly newer areas, but there were a few exceptions. Ladera Ranch and Rancho Mission Viejo, Coto de Caza, Newport Coast, Rancho Santa Margarita, and Talega are all newer areas. More homeowners move between two to eight years of homeownership than any other number of years lived in a home. In newer areas, more homeowners fall within this parameter than in older, more established areas. Laguna Woods has enjoyed a higher turnover for years now and has been an exception on this list. Corona del Mar and Dove Canyon are two areas that are new to the list. Why they are at the top of the list is anybody’s guess. The top turnover rate in Orange County can be found in Ladera Ranch and Rancho Mission Viejo, once every 11 years.

The lowest turnover rates can be found in more established, older cities: Anaheim, Buena Park, Cypress, Fountain Valley, Seal Beach, Westminster, and La Palma. The lowest rate in Orange County was in La Palma where homeowners are moving once every 30 years.

Through surveys and in-depth studies, experts and statisticians have figured out many of the reasons there are not enough homes for sale. The biggest contributing factor is that baby boomers are staying put. They are not moving like many had originally anticipated. They have been slower than prior generations to sell the family home. Perhaps it is because baby boomers are living longer and are living a healthier lifestyle. The need to sell the family home is not as daunting right now, so they are happy to just age in place.

During the Great Recession and the recovery, millions of investors have converted family homes into rentals. With rising home values coupled with rising rents, holding onto these homes has proved to be a wise long-term investment. There is no incentive for them to sell anytime soon.

In addition, homeowners have cashed in on lower mortgage rates through purchase and refinance loans. Many are locked into 30-year fixed rates well below 4%. As interest rates rise, homeowners will elect to stay put and continue to enjoy their lower interest rates.

Finally, new homebuilders are ignoring the entry-level buyer. Builders used to cater to the entry-level buyer and the luxury end was the exception. Today, it is the other way around. Seemingly, everything is now tilting towards the luxury buyer. Without new affordable housing, the residential resale entry level has been squeezed. As a result, the lower end resale market has been on fire for years now and has appreciated dramatically, propping up the rest of the market.

Buyers in today’s market need to understand that the lack of supply is not a trend; it is the new norm. To be successful, buyers must realistically approach the market with a solid game plan, a game plan that includes patience, a very sharp pencil, and the ability to proceed quickly.

Active Inventory: The active inventory continues to climb.

In spite of massive, unbridled demand, the active inventory continues to rise, climbing an additional 5%, 197 homes, in the past two weeks, and now sits at 4,178. At this point, it appears as if the active inventory is trending towards surpassing last year’s incredibly low annual height of 6,000 homes. It has actually been increasing at a faster clip to start 2018 compared to last year.

Last year at this time, there were 4,460 homes on the market, 7% more than today. The year over year difference has slowly been diminishing.

Demand: Demand increased by 7% in the past two weeks.

Demand, the number of new pending sales over the prior month, has increased by 155 pending sales over the past couple of weeks and now totals 2,441, its highest level since September of last year. Demand will continue to rapidly increase from now through April and will peak sometime between April and May.

Last year at this time, demand was at 2,651 pending sales, 210 more than today, or 9%. The number of pending sales has dropped this year because of a serious lack of inventory of homes priced below $750,000. Fewer opportunities in the lower ranges have seriously undermined potential demand. Hopefully, this phenomenon will diminish as more homes enter the fray during the Spring Market.

The expected market time, the amount of time it would take for a home that comes onto the market today to be placed into escrow, decreased from 52 to 51 days in the past two weeks, a hot, seller’s market.

Luxury End: Both luxury demand and the luxury inventory increased by 5% in the past couple of weeks.

In the past two weeks, demand for homes above $1.25 million increased from 336 to 354 pending sales, up 5%. The luxury home inventory increased from 1,540 homes to 1,629, up 5% as well. Expect both demand and the inventory to rise throughout the Spring Market. The current expected market time for all homes priced above $1.25 million remained at 138 days over the past two-weeks.

For homes priced between $1.25 million and $1.5 million, the expected market time decreased from 81 to 79 days. For homes priced between $1.5 million and $2 million, the expected market time decreased from 122 to 115 days. For homes priced between $2 million and $4 million, the expected market time increased from 163 days to 167. In addition, for homes priced above $4 million, the expected market time increased substantially from 349 to 515 days. At 515 days, a seller would be looking at placing their home into escrow around the end of July 2019.

Orange County Housing Market Summary:

The active listing inventory increased by 197 homes in the past two weeks, up 5%, and now totals 4,178. Expect the inventory to increase from now through mid-Summer. Last year, there were 4,460 homes on the market, 282 more than today.

There are 26% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 12%. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly disappearing.

Demand, the number of pending sales over the prior month, increased in the past two-weeks by 155 pending sells, up 7%. The average pending price is $876,310.

The average list price for all of Orange County remained at $1.8 million over the past two weeks. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.

For homes priced below $750,000, the market is HOT with an expected market time of just 31 days. This range represents 35% of the active inventory and 58% of demand.

For homes priced between $750,000 and $1 million, the expected market time is 43 days, a hot seller’s market (fewer than 60 days). This range represents 17% of the active inventory and 21% of demand.

For homes priced between $1 million to $1.25 million, the expected market time is 63 days, a slight seller’s market (between 60 and 90 days).

For luxury homes priced between $1.25 million and $1.5 million, the expected market time dropped from 81 days to 79. For homes priced between $1.5 million and $2 million, the expected market time decreased from 122 to 115 days. For luxury homes priced between $2 million and $4 million, the expected market time increased from 163 days to 167 days. For luxury homes priced above $4 million, the expected market time dramatically increased from 349 to 515 days.

The luxury end, all homes above $1.25 million, accounts for 39% of the inventory and only 14% of demand.

The expected market time for all homes in Orange County dropped from 52 days to 51 in the past two weeks, a hot seller’s market (fewer than 60 days). From here, we can expect the market time to drop a little bit more by the end of the month.

Distressed homes, both short sales and foreclosures combined, make up only 1% of all listings and 2% of demand. There are only 18 foreclosures and 22 short sales available to purchase today in all of Orange County, that’s 40 total distressed homes on the active market, rising by only one in the past two weeks. That’s right after reaching its lowest level since the very beginning of the Great Recession. Last year there were 85 total distressed sales, 113% more than today.

There were 1,800 closed residential resales in January, down by 9% from January 2017’s 1,904 closed sales. January marked a 21% drop from December 2017. The sales to list price ratio was 97.6% for all of Orange County. Foreclosures accounted for just 1.1% of all closed sales and short sales accounted for 0.8%. That means that 98.1% of all sales were good ol’ fashioned sellers with equity.

Orange County Housing Report:“The Spring Market Has Arrived”

Orange County Housing Report February 13th, 2018

With demand exploding onto the scene, it is officially the
best season to sell a home.

Spring Market: The activity below $1 million is nothing short of CRAZY!!

In Southern California, it is hard to tell the seasons apart. You have to look up at the trees to see if there are leaves or not. The time of the sunset is another dead giveaway. Are there flowers yet?

Similarly, there are signs that the housing market has officially changed. There is a steady stream of buyers at open houses for all homes priced below $1.25 million. Sellers are entertaining multiple offers within days of coming on the market. Buyers are writing offers before even seeing the home. That’s right; the crazy Spring Market has arrived.

Many are scratching their heads knowing that the first day of spring is not until March 20th. That is when the days are longer, the flowers are blooming, and trees are sprouting their new leaves. However, the Spring Market in Southern California actually starts in February and runs all the way through the end of May. The expected market time, the amount of time it would take to place a home onto the market and then into escrow dips to its lowest level of the year. Orange County housing is already moving at a feverish pitch.

This year will be similar to 2017 when the expected market time dipped below 60-days, considered a hot, seller’s market, throughout the entire Spring Market. Spring 2018 is going to be hot. Buyers will be faced with tremendous competition to buy, and sellers will be running the table.

The market is very hot for attached homes, currently running at 41 days. It is a hot, seller’s market for all attached homes priced below $1 million. The hottest range is condominiums priced between $250,000 and $750,000. That range represents 82% of all attached home demand.

Take a look at the velocity of the market already. For detached homes, the expected market time dipped below 60-days for the first time since the start of April 2017. It is less than a month, 29-days, for homes priced below $500,000. For homes priced between $500,000 and $750,000, it is a 31-day market. It is a hot market for homes priced between $750,000 and $1 million with a 39-day expected market time. From $1 million to $1.25 million, it too is below the 60-day threshold at 51-days. From $1.25 million to $1.5 million, it is still considered a seller’s market, just not a mad rush like the lower ranges.

For detached homes priced above $1.5 million and attached homes priced above $1 million, the market does not lean in the seller’s favor. As prices rise, sellers are faced with a much slower market. They represent 31% of the inventory and only 9% of demand.

For the rest of the market, we are back to bidding wars. When a home procures 15 offers, there is only one winner. The other 14 buyers need to go back to the drawing board and start the process all over again. It is extremely frustrating being a buyer in today’s market. After losing out on one or two homes, most buyers sharpen their pencils and are prepared to write very strong offers in their attempt to secure a home, maybe even stretch the offered price a bit. That is how buyers have been approaching the hot Spring Market selling season since 2012.

Warning to Buyers: regardless of rising interest rates and the volatility of Wall Street, the market is not going to change anytime soon and tilt in the buyer’s favor. The trends are lined up in favor of sellers with tremendous demand and a very low supply of homes to purchase.

Warning to Sellers: pricing very close to the most recent comparable pending and closed sales is fundamental in order to find success. The active inventory has already started to increase despite red-hot demand. This is due primarily to the fact that many sellers cannot help themselves. They ignore the comparable data and reach for the moon, overpricing their homes and sitting on the market without success.

Active Inventory: The active inventory increased by 5% in the past couple of weeks.

The active listing inventory added an additional 207 homes in the past two-weeks, a 5% increase, and now sits at 3,981. The inventory will cross the 4,000 home threshold this week and will continue its climb through the summer. The inventory is actually increasing at a faster clip than last year at this time. Moreover, it is occurring at a time when demand is hot. It is too early to tell if this trend will continue, enabling the inventory to surpass last year’s heights.

Last year at this time, there were 4,448 homes on the market, 12% more than today. The year over year difference has slowly been diminishing.

Demand: Demand increased by 58% in the past month.

Demand, the number of new pending sales over the prior month, has exploded onto the scene and increased by 839 pending sales over the past 4-weeks and now totals 2,286, its highest level since November. Demand will continue to rapidly increase from now through April and will peak sometime between April and May.

Last year at this time, demand was at 2,430 pending sales, 117 more than today, or 5%. This is primarily due to fewer homes on the active listing market since the start of the year. As more homes come enter the fray during the Spring Market, demand will achieve similar levels compared to 2017.

The expected market time, the amount of time it would take for a home that comes onto the market today to be placed into escrow, decreased from 64 to 52 days in the past two weeks, a hot, seller’s market.

In the past two weeks, demand for homes above $1.25 million increased from 241 to 336 pending sales, up an incredible 39%. The luxury home inventory increased from 1,429 homes to 1,540, an 8% rise in the past two-weeks. Expect both demand and the inventory to rise throughout the Spring Market. The current expected market time for all homes priced above $1.25 million plunged from 178 days to 138. The luxury range is heating up, but nothing like the lower ranges with an expected market time of just 36 days for homes below $1 million.

For homes priced between $1.25 million and $1.5 million, the expected market time dropped from 112 to 81 days. For homes priced between $1.5 million and $2 million, the expected market time decreased from 145 to 122 days. For homes priced between $2 million and $4 million, the expected market time decreased from 221 days to 163. In addition, for homes priced above $4 million, the expected market time dipped from 355 to 349 days. At 349 days, a seller would be looking at placing their home into escrow around the end of January 2019.

Orange County Housing Market Summary:

The active listing inventory increased by 207 homes in the past two weeks, up 5%, and now totals 3,981. Expect the inventory to increase from now through mid-Summer. Last year, there were 4,448 homes on the market, 467 more than today.

There are 29% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 20%. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly disappearing.

Demand, the number of pending sales over the prior month, skyrocketed in the past two weeks by adding an additional 522 pending sells, up 30%. The average pending price is $909,074.

The average list price for all of Orange County remained at $1.8 million over the past two weeks. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.

For homes priced below $750,000, the market is HOT with an expected market time of just 33 days. This range represents 36% of the active inventory and 57% of demand.

For homes priced between $750,000 and $1 million, the expected market time is 43 days, a hot seller’s market (fewer than 60 days). This range represents 17% of the active inventory and 21% of demand.

For homes priced between $1 million to $1.25 million, the expected market time is 54 days, a hot seller’s market.

For luxury homes priced between $1.25 million and $1.5 million, the expected market time dropped from 112 days to 81. For homes priced between $1.5 million and $2 million, the expected market time decreased from 145 to 122 days. For luxury homes priced between $2 million and $4 million, the expected market time decreased from 221 days to 163 days. For luxury homes priced above $4 million, the expected market time fell from 355 to 349 days.

The luxury end, all homes above $1.25 million, accounts for 39% of the inventory and only 14% of demand.

The expected market time for all homes in Orange County dropped from 64 days to 52 in the past two weeks, a hot seller’s market (fewer than 60 days). From here, we can expect the market time to drop a little bit more by the end of the month.

Distressed homes, both short sales and foreclosures combined, make up only 1% of all listings and 2.3% of demand. There are only 16 foreclosures and 23 short sales available to purchase today in all of Orange County, that’s 39 total distressed homes on the active market, dropping by 8 in the past two weeks and reaching its lowest level since the very beginning of the Great Recession. Last year there were 103 total distressed sales, 164% more than today.

There were 1,799 closed residential resales in January, down by 9% from January 2017’s 1,904 closed sales. January marked a 21% drop from December 2017. The sales to list price ratio was 97.6% for all of Orange County. Foreclosures accounted for just 1.1% of all closed sales and short sales accounted for 0.8%. That means that 98.1% of all sales were good ol’ fashioned sellers with equity.

Orange County Housing Report:“On Your Mark, Get Set, Go!!!”

Orange County Housing Report January 31st, 2018

With the holidays behind us, the 2018 Orange County housing market is beginning to rev its engine.

Heating Up Fast: With a low housing supply and fierce demand, the housing market is accelerating fast.

In the blink of an eye, Starbucks holiday cups are gone, all of the ornaments are tucked away, and most of those good intentioned New Year’s resolutions have fallen victim to the hustle and bustle of everyday life. Emerging from the fog of all of the holiday distractions are buyers eager and ready to purchase their next home.

In just two weeks, demand has increased 22% while supply has only increased 2%. To understand why the market is changing so rapidly, let’s dust off that old Econ 101 book that details supply and demand. When there is a lot of supply and very little demand, prices fall, which favors buyers. When there is very little supply and tremendous demand, prices rise, which favors sellers. Since 2012, the supply of homes on the market has been severely constrained and demand, propped up by historically low-interest rates, has been through the roof.

When the supply of homes is low and demand to buy a piece of the “American Dream” is high, the expected market time falls. That is precisely what is occurring right now. During the Holiday Market, the supply of homes was low and so was demand. Buyers were distracted by the holidays and diverted their attention away from housing. Now that the holidays are in the rearview mirror, the supply of homes has remained at chronically low levels, while demand is rapidly rising. As a result, the expected market time, the amount of time it would take from placing a home on the market to opening escrow, is falling like a rock.

In just two weeks, the expected market time for all price ranges combined dropped from 77 days to 64, knocking on the door of an extremely hot seller’s market. For homes priced below $1 million, the market is already hot and will only grow hotter. The higher price ranges will also heat up, but will not sizzle like the lower ranges. Above $1.5 million, the market will improve but will be a lot more sluggish.

The housing market is forging its way to the absolute best time to sell, from about mid-February through mid-May. That is when the expected market time drops to its lowest levels of the year. Homes will fly off the market at the fastest annual rate. From mid-May through June, a deluge of sellers enter the fray, exceeding the number of pending sales, and the expected market time actually rises. Going back to “supply and demand,” demand remains steady and strong while the supply of homes on the market increases. As a result, the expected market time rises. It is still a great time to sell, just not as hot as earlier in the year. From July through the remainder of 2018, the expected market time will remain elevated.

It is extremely important to note that placing a home on the market during the hottest time of the year does not guarantee success. It is still all about price. When sellers price their homes too aggressively, they sit on the market and do not entertain offers to purchase. A stunning 25% of all homes that have been placed into escrow so far this year had to reduce their asking price at least once. When the market is hot, carefully pricing a home close to its Fair Market Value is the absolute best way to approach the market. This can be accomplished by diligently analyzing recent comparable pending and closed sales and not giving too much weight to active listings. A realistic price will attract multiple offers to purchase and, often times, will allow a seller to fetch a sales price at or higher than the active listing price.

The market is not titling in favor of buyers and will not anytime soon. Buyers should approach the market with a ton of patience and the mindset that they will eventually persevere. It may take writing offers on 10 different homes, but in the end will be worth it. Interest rates are still at historically low rates, but this gift will not last forever. Waiting is not the answer.

Active Inventory: The active inventory increased by only 67 homes in the past couple of weeks.

The active listing inventory added an additional 67 homes in the past two-weeks, a 2% increase, and now sits at 3,774. The biggest issue for Orange County housing this year has been a real lack of inventory. Thus far in 2018, there have been 6% fewer homes placed on the market. This issue has prevented additional closed sales and has been undermining the true potential for housing. If there were more homes for sale, there would be more pending and closed sales.

We can expect the inventory to continue to rise from now through mid-summer until it reaches a peak somewhere between mid-July and mid-August. The velocity of homes coming on the market will pick up steam in mid-March as the active inventory climbs at is highest rate of the year.

Last year at this time, there were 4,320 homes on the market, 14% more than today.

Demand: Demand increased by 22% in the past couple of weeks.

Buyers are extremely eager to purchase, yet are faced with a very anemic inventory. Buyers are gobbling up inventory nearly as fast as homes are placed onto the market. As a result, in the past two weeks, demand, the number of new escrows over the prior month, increased by 317 pending sales, or 22%, and now totals 1,764. That’s the largest gain since the start of February of last year. The housing market is only revving the engine at this point. Expect demand to continue to accelerate from here until it peaks sometime in May.

Last year at this time, demand was at 1,930 pending sales, 166 more than today, or 9%. This is primarily due to fewer homes coming on the market. There simply are not enough choices.

The expected market time, the amount of time it would take for a home that comes onto the market today to be placed into escrow, decreased from 77 to 64 days in the past two weeks, a seller’s market with mild appreciation.

Luxury End: Luxury demand has thawed and dramatically improved in just two weeks.

In the past two weeks, demand for homes above $1.25 million increased from 170 to 241 pending sales, up a staggering 42%. The luxury home inventory increased from 1,376 homes to 1,429, a 4% rise in the past two-weeks. Expect both demand and the inventory to rise from now through the Spring Market. The current expected market time for all homes priced above $1.25 million plunged from 243 days to 178.

For homes priced between $1.25 million and $1.5 million, the expected market time dropped from 157 to 112 days. For homes priced between $1.5 million and $2 million, the expected market time decreased from 188 to 145 days. For homes priced between $2 million and $4 million, the expected market time decreased from 285 days to 221 days. In addition, for homes priced above $4 million, the expected market time dipped from 695 to 355 days. At 355 days, a seller would be looking at placing their home into escrow around January 2019.

Orange County Housing Market Summary:

The active listing inventory increased by 67 homes in the past two weeks and now totals 3,774. Expect the inventory to increase from now through mid-Summer. Last year, there were 4,320 homes on the market, 546 more than today.

There are 25% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 28%. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly disappearing.

Demand, the number of pending sales over the prior month, skyrocketed in the past two weeks by adding an additional 317 pending sells, up 22%. The average pending price is $902,385.

The average list price for all of Orange County remained at $1.8 million over the past two weeks. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.

For homes priced below $750,000, the market is HOT with an expected market time of just 40 days. This range represents 37% of the active inventory and 59% of demand.

For homes priced between $750,000 and $1 million, the expected market time is 55 days, a hot seller’s market (fewer than 60 days). This range represents 17% of the active inventory and 20% of demand.

For homes priced between $1 million to $1.25 million, the expected market time is 68 days, a slight seller’s market (between 60 and 90 days).

For luxury homes priced between $1.25 million and $1.5 million, the expected market time dropped from 157 days to 112. For homes priced between $1.5 million and $2 million, the expected market time decreased from 188 to 145 days. For luxury homes priced between $2 million and $4 million, the expected market time decreased from 285 days to 221 days. For luxury homes priced above $4 million, the expected market time fell from 695 to 355 days.

The luxury end, all homes above $1.25 million, accounts for 37% of the inventory and only 13% of demand.

The expected market time for all homes in Orange County dropped from 77 days to 64 in the past two weeks, a slight seller’s market (60 to 90 days). From here, we can expect the market time to drop dramatically through mid-February.

Distressed homes, both short sales and foreclosures combined, make up only 1.2% of all listings and 2.2% of demand. There are only 15 foreclosures and 32 short sales available to purchase today in all of Orange County, that’s 47 total distressed homes on the active market, dropping by 3 in the past two weeks and reaching its lowest level since the very beginning of the Great Recession. Last year there were 91 total distressed sales, 74% more than today.

There were 2,269 closed residential resales in December, down by 9% from December 2016’s 2,484 closed sales. December marked a 6.5% drop from November 2017. The sales to list price ratio was 97.3% for all of Orange County. Foreclosures accounted for just 0.8% of all closed sales and short sales accounted for 0.9%. That means that 98.3% of all sales were good ol’ fashioned sellers with equity.

Orange County Housing Report: Home Supply Slicing Into Sales

The lack of homes for sale in Orange County has hit pending sales activity.

Orange County Housing Report September 13th, 2017

Supply Cuts Pending Sales: The number of pending sales over the past month dropped by 7% due to a supply of homes that are now dropping as well.
Homeowners have been behaving differently ever since the Great Recession began a decade ago. A trend evolved and it has not changed since 2008. That trend is a drought of homeowners opting to sell their homes. In fact, this year it has been even more pronounced.

The number of homes placed on the market this year is the second lowest level this century behind 2012. The lack of homes FOR SALE back then was understandable as home values were only starting to rise and many homeowners were upside down in their homes, owing more than their homes were worth. Flash forward five years later to today and home values have appreciated substantially (the median value of a resale home has increased by more than 60%). Even with the extra equity, homeowners are opting to stay put and are not moving. The trend continues.

This year, there have been 7% fewer homes that have come on the market compared to last year, 2,055 fewer to be exact. For perspective, there have been 18,000 fewer FOR SALE signs this year compared to 2004. This lack of inventory has hurt the true potential for closed sales. With interest rates below 4%, buyers have been chomping at the bit to purchase; yet, they face stiff competition due to a lack of supply.

Today there are 20% fewer choices on the market compared to last year, 5,639 versus 7,040. As a result, the number of pending sales over the prior month (how Reports On Housing gauges demand), dropped in the past couple of weeks by 7%, with 201 fewer pending sales, now totaling 2,624. Today’s demand is 3% off of last year’s 2,719. The lack of supply is truly cutting into the number of pending sales and has undercut demand.

True demand, buyers ready, willing and able to buy today, is much higher than the pending sales count is showing simply because of not enough choices. There are insufficient homes FOR SALE in the lower ranges, homes priced below $750,000. This range accounts for 39% of the inventory and 60% of demand. If there were more homes available within this range, the number of pending sales, and ultimately closed sales would skyrocket. This price range is underserved as fewer and fewer homeowners are electing to sell. There are 41% fewer active listings available today below $500,000 compared to last year, and the expected market time (the amount of time it will take a home placed on the market today to open escrow) is a blistering hot 36 days. There are 22% fewer homes available between $500,000 and $750,000, and the expected market time is a hot 46 days. These hot markets are a direct result of a skimpy supply all year long.

There are 25% fewer homes on the market between $750,000 to $1 million, yet the expected market time is at 56 days, not as hot as the lower price ranges. Even though there are fewer choices for buyers, sellers better are priced on the money or they won’t be successful. For homes priced above $1 million, there may be slightly fewer homes on the market compared to last year; however, the expected market time runs from 93 days ($1 million to $1.25 million) to 460 days ($4 million and up). These sellers not only need to be priced precisely on target, they must pack their patience as well.

The bottom line: the Orange County housing market could use more homes on the market, especially in the lower ranges. This lack of inventory has diminished the number of pending and closed sales and has prevented local housing from reaching its full potential.

Active Inventory: The active inventory dropped by 4% over the past couple of weeks.
The active listing inventory shed 223 homes in the past two weeks and now sits at 5,639. It is the lowest level for this time of the year since 2012. The active inventory is falling as expected now that the Autumn Market is here. It will continue to trend down through the remainder of the year, picking up steam after Thanksgiving, the start of the Holiday/Winter Market.

Last year at this time, there were 7,040 homes on the market, 1,401 additional homes or 25% more than today.

Demand: Demand decreased by 7% in the past couple of weeks.
Demand, the number of homes placed into escrow within the prior month, decreased by 201 pending sales, or 7%, in the past two-weeks and now totals 2,624. The drop is primarily due to a lack of available choices in the lower ranges below $750,000. For homes priced above $750,000, with the only exception being homes between $1.5 million to $2 million, demand is actually up year over year. There have also been slightly more homes placed on the market year over year for these higher price ranges.

Last year at this time, demand was at 2,719 pending sales, 95 more than today.Luxury End: Luxury demand plunged by 7% in the past couple of weeks and the inventory dropped by 1%.
In the past two weeks, demand for homes above $1.25 million decreased from 385 to 358 pending sales, a 7% drop. The luxury home inventory decreased from 2,002 homes to 1,979, a 1% drop. As a result, the expected market time for all homes priced above $1.25 million increased from 156 days to 166 days. The luxury inventory and demand will continue to drop through the end of the year

For homes priced between $1.25 million and $1.5 million, the expected market time decreased from 98 to 90 days. For homes priced between $1.5 million and $2 million, the expected market time increased from 134 to 171 days. For homes priced between $2 million and $4 million, the expected market time increased from 185 days to 198 days. In addition, for homes priced above $4 million, the expected market time decreased from 462 to 460 days. At 460 days, a seller would be looking at placing their home into escrow around the mid-December 2018.

Orange County Housing Market Summary:

The active listing inventory decreased by 223 homes in the past couple of weeks and now totals 5,639. The trend is down for the remainder of the year. Last year, there were 7,040 homes on the market, 1,401 more than today.

There are 41% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 21%. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly disappearing.

Demand, the number of pending sales over the prior month, decreased by 201 homes in the past couple of weeks, down 7%, and now totals 2,624. The average pending price is $860,101.

The average list price for all of Orange County increased from $1.6 million to $1.7 million. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.

For homes priced below $750,000, the market is HOT with an expected market time of just 42 days. This range represents 39% of the active inventory and 60% of demand.

For homes priced between $750,000 and $1 million, the expected market time is 56 days, a hot seller’s market (less than 60 days). This range represents 18% of the active inventory and 20% of demand.

For homes priced between $1 million to $1.25 million, the expected market time is 93 days, a balanced market that does not favor a buyer or seller.

For luxury homes priced between $1.25 million and $1.5 million, the expected market time decreased from 98 days to 93. For homes priced between $1.5 million and $2 million, the expected market time increased substantially from 134 to 171 days. For luxury homes priced between $2 million and $4 million, the expected market time increased from 185 days to 198 days. For luxury homes priced above $4 million, the expected market time decreased from 462 to 460 days.

The luxury end, all homes above $1.25 million, accounts for 34% of the inventory and only 14% of demand.

The expected market time for all homes in Orange County increased in the past couple of weeks from 61 days to 62 days, a tepid seller’s market (60 to 90 days). From here, we can expect the market time to slowly rise as housing makes its way through the Autumn Market.

Distressed homes, both short sales and foreclosures combined, make up only 1.5% of all listings and 2.4% of demand. There are only 33 foreclosures and 54 short sales available to purchase today in all of Orange County, that’s 87 total distressed homes on the active market, increasing by 5 in the past two weeks. Last year there were 125 total distressed sales, 44% more than today.

There were 3,110 closed sales in August, a 12% increase over July 2017 and a 1.3% increase over August 2016. The sales to list price ratio was 98.1% for all of Orange County. Foreclosures accounted for just 0.8% of all closed sales and short sales accounted for 0.7%. That means that 98.5% of all sales were good ol’ fashioned equity sellers.

Orange County Housing Report: A Blazing Hot Autumn

With an extremely low inventory and blistering demand, the Autumn Market is poised to be the hottest in years.

Orange County Housing Report August 29th, 2017

A Hot Autumn: With 19% fewer FOR SALE signs this year compared to last, the Autumn Market is going to be hot.

It is that time of the year. Have you seen all of the signs? The leaves are starting to fall, the kids are back in school, and Costco already has Halloween costumes. That is right, autumn is here. The official start to autumn is not until Friday, September 22, but all of the signs are here.

As for Orange County housing, the Autumn Market typically starts around the end of August when the kids head back to their classrooms. It’s no longer the “prime” season for real estate. Both the Spring and Summer Markets are in the past. Housing will now shift gears and transition to a slower time of the year. This year will not be an exception, demand will fall, sales will fall, and the expected market time will start to rise. Nevertheless, this year will be the hottest Autumn Market since 2005.

Today, there are 19% fewer FOR SALE signs on the active listing inventory right now compared to last year at this time. In fact, the last time the supply of homes was this low at the end of August dates back to 2012 when the active inventory was dropping like a rock. And, in spite of this year being the second fewest number of homeowners opting to place their homes on the market this century (2012 was the lowest), demand has remained strong. Demand, the number of new pending sales over the prior month, is still at end of March levels. As a result, the current expected market time is at levels not seen since 2013.

The expected market time takes into account both supply and demand. It is the amount of time a seller can expect to be on the market before opening up escrow. It is the velocity of the market as a whole. Todays expected market time is 62 days, 19% lower than last year’s 77 days. At 62 days, all of Orange County it is a seller’s market. It is no longer a HOT seller’s market, below 60 days, as it was from the end of January to the middle of June of this year, but it is still hotter than July’s 63 day expected market time.

Everything priced below the $1 million mark, is flying off the shelves. The expected market time for homes priced below $500,000 is 34 days. Now that is hot! Above $1 million is a bit of different story, the higher the price, the slower the market. For homes priced above $4 million, the expected market time rises to 462 days.

From here, we can expect the active listing inventory to continue to fall throughout the remainder of 2017. Demand, in terms of new pending sales, will slowly but surely drop throughout the Autumn Market. It will then drop like a rock from Thanksgiving through the end of the year. With both the inventory and demand dropping, the expected market time will only rise slightly for the remainder of the year.

A warning for sellers: do not stretch the asking price much at all. Word from the real estate trenches indicates that many homeowners in the lower ranges are sitting on the market with very little activity and no offers to purchase because of price. In spite of the hotter real estate market, buyers are not willing to overpay for a property. As a seller, if you have been on the market for a while and the number of buyer showings has dropped considerably, the market is speaking to you. It is most likely the price. Homes that are priced well, taking into consideration condition, upgrades, and location, will attract offers to purchase.

A warning for buyers: do not expect the market dynamics to change much in the coming months. Even with a drop in buyer demand during the autumn and Holiday Markets, meaning less buyer competition, there will also be a drop in the number of homeowners placing their homes on the market. Many homeowners will opt to pull their homes off of the market now that both the Spring and Summer Markets are in the rearview mirror. Ultimately, there will be fewer choices. With a drop in both supply and demand at the same time, the expected market time will not fluctuate much.

Active Inventory: The active inventory dropped only slightly during the past couple of weeks.

The active listing inventory shed 15 homes in the past two weeks and now sits at 5,862. Fifteen homes may not be a lot, but it illustrates the direction that the active listing inventory will be heading for the remainder of the year: DOWN. It is the second lowest level this century, trailing only 2012. Typically, the inventory peaks around mid-August, but this year it peaked in mid-July.

Last year at this time, there were 7,267 homes on the market, 1,405 additional homes or 24% more than today.

Demand: Demand decreased by 2% in the past couple of weeks.

Demand, the number of homes placed into escrow within the prior month, decreased by 65 pending sales, or 2%, in the past two-weeks and now totals 2,825. Demand is off the most in the lower end, homes priced below $750,000. Today, there are 39% fewer homes available below $500,000 compared last year at this time and demand is off by 20%. Obviously, there is plenty of pent up demand and this data point would be through the roof if there were more homes available. Demand is off by 7% for homes priced between $500,000 and $750,000 with 20% fewer homes on the market. Above $750,000, demand is stronger this year compared to last year despite fewer homes on the market.

Last year at this time, demand was at 2,843 pending sales, 18 more than today.

Luxury End: Luxury demand increased by 4% in the past couple of weeks and the inventory dropped by 3%.

In the past two weeks, demand for homes above $1.25 million increased from 369 to 385 pending sales, a 4% increase. The luxury home inventory decreased from 2,072 homes to 2,002, a 3% drop. As a result, the expected market time for all homes priced above $1.25 million dropped from 168 days to 156 days. The luxury inventory will continue to drop through the end of the year. Similarly, luxury demand will drop significantly through the end of the year, but it will bounce around a bit, typically increasing slightly in October.

For homes priced between $1.25 million and $1.5 million, the expected market time decreased from 110 to 98 days. For homes priced between $1.5 million and $2 million, the expected market time increased from 130 to 134 days. For homes priced between $2 million and $4 million, the expected market time decreased from 224 days to 185 days. In addition, for homes priced above $4 million, the expected market time decreased from 480 to 462 days. At 468 days, a seller would be looking at placing their home into escrow around the start of December 2018.

Orange County Housing Market Summary:

The active listing inventory decreased by 15 homes in the past couple of weeks, and now totals 5,862. The trend is down for the remainder of the year. Last year, there were 7,267 homes on the market, 1,405 more than today.

There are 39% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 20%. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly disappearing.

Demand, the number of pending sales over the prior month, decreased by 65 homes in the past couple of weeks, down 2%, and now totals 2,825. The average pending price is $866,086.

The average list price for all of Orange County remained at $1.6 million. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.

For homes priced below $750,000, the market is HOT with an expected market time of just 40 days. This range represents 40% of the active inventory and 60% of demand.

For homes priced between $750,000 and $1 million, the expected market time is 57 days, a hot seller’s market (less than 60 days). This range represents 18% of the active inventory and 19% of demand.

For homes priced between $1 million to $1.25 million, the expected market time is 78 days, a tepid seller’s market with very little appreciation.

For luxury homes priced between $1.25 million and $1.5 million, the expected market time decreased from 110 days to 98. For homes priced between $1.5 million and $2 million, the expected market time increased from 130 to 134 days. For luxury homes priced between $2 million and $4 million, the expected market time dropped from 224 days to 185 days. For luxury homes priced above $4 million, the expected market time decreased from 480 to 462 days.

The luxury end, all homes above $1.25 million, accounts for 34% of the inventory and only 14% of demand.

The expected market time for all homes in Orange County increased in the past couple of weeks from 61 days to 62 days, a tepid seller’s market (60 to 90 days). From here, we can expect the market time to slowly rise as housing makes its way through the Autumn Market.

Distressed homes, both short sales and foreclosures combined, make up only 1.4% of all listings and 2.7% of demand. There are only 30 foreclosures and 52 short sales available to purchase today in all of Orange County, that’s 82 total distressed homes on the active market, dropping by 6 in the past two weeks. Last year there were 136 total distressed sales, 66% more than today.

There were 2,768 closed sales in July, a 14% drop over June 2017 and a 1.9% decrease over July 2016. The sales to list price ratio was 98.2% for all of Orange County. Foreclosures accounted for just 0.8% of all closed sales and short sales accounted for 0.8%. That means that 98.4% of all sales were good ol’ fashioned equity sellers.

Orange County Housing Report: An Early 2017 Peak

A low inventory peak means a hot seller’s market for quite some time.

Orange County Housing Report August 15th, 2017

Active Inventory Peak: the active inventory has been low for years, but this year it has been exceptionally low.

The Orange County housing market has been frustrating buyers for years now and 2017 has proved to be especially frustrating. With 7% fewer FOR SALE signs this year compared to last year, there just have not been enough homes to satiate the voracious appetite of buyers.

As a result of low inventory and off-the-chart demand, Orange County homes have appreciated non-stop since 2012. In the past year alone (July ’17 over July ’16), the median sales price has risen by 5.5%, and since 2012 has risen by 80%. Even with a rising median sales price, the historically low interest rate environment is keeping homes affordable. And, interest rates are projected to remain low for the rest of the year and into 2018 as well.

An anemic inventory is only going to fuel future appreciation. Buyers will continue to compete with limited choices and multiple offers will persist, especially in the lower ranges, homes priced below $750,000. The inventory will remain low for quite some time because the active listing inventory peaked about a month ago, not quite reaching the 6,000 home mark. For perspective, the active inventory needs to remain above 8,000 homes for quite some time in order for the housing market to move from a seller’s market to a balanced market, one that does not favor a buyer or seller.

In the past couple of weeks, the active inventory shed 90 homes and now totals 5,877. The peak occurred a month ago at 5,983 homes. Last year’s peak was at 7,329 homes, 22% higher, or 1,346 more FOR SALE signs than this year. There are significantly fewer homes on the market throughout Orange County. The difference is substantial in certain areas of the county. For example, in Aliso Viejo there are 40% fewer homes on the market today compared to 2016 at this time. There are 79 available homes compared to 131. It was challenging finding a home last year, but this year has been significantly worse. With the exception of four areas, Corona del Mar, Cypress, Dana Point, and Portola Hills, there simply are not enough homes on the market compared to a year ago today.

This year’s peak is the lowest peak since Reports On Housing started tracking the local housing market back in 2004. Keeping that in mind, where will the Orange County housing market go from here? First, the active inventory will continue to drop though the end of the year, picking up steam in September. By that point, housing will have moved onto the Autumn Market when fewer homeowners will opt to place their homes on the market with the best time of the year to sell, the Spring and Summer Markets, officially in the rearview mirror.

With such a low peak, the expected seasonal drop in the inventory from now until New Year’s will result in a very anemic start to 2018. It may dip to the record lows of 2013, when there were only 3,161 homes to start the year. Quite simply, there were not enough homes to keep up with the strong demand and bidding wars escalated during the spring. That could be the case this coming year in spite of high prices. Additionally, the low interest rate environment will help fuel another crazy start to the Orange County housing market.

Demand: Demand increased by 2% in the past couple of weeks.

Demand, the number of homes placed into escrow within the prior month, increased by 55 pending sales, or 2%, in the past two-weeks and now totals 2,890. Demand is either near the same or considerably higher in every price range except for properties priced below $500,000. With 41% fewer homes available below $500,000 compared to this time last year, it is no wonder that demand is off by 20% year over year in this range.

Last year at this time, demand was at 2,935 pending sales, 45 more than today. The expected market time was at 75 days. The current expected market time dropped from 63 days two weeks ago to 61 today. At 61 days, the market is not quite a HOT seller’s market, but a tepid seller’s market with muted appreciation (60 to 90 days).

Luxury End: Luxury demand dropped by 1% in the past couple of weeks and the inventory increased by only 7 homes.

In the past two weeks, demand for homes above $1.25 million decreased from 373 to 369 pending sales, a 1% drop, the. The luxury home inventory increased from 2,065 homes to 2,072, nearly the same. The luxury end is not evolving that much right now.

For homes priced between $1.25 million and $1.5 million, the expected market time increased from 101 to 110 days. For homes priced between $1.5 million to $2 million, the expected market time dropped from 135 to 130 days. In addition, for homes priced above $2 million, the expected market time decreased from 280 days to 278 days. At 278 days, a seller would be looking at placing their home into escrow around mid-May of next year.

Orange County Housing Market Summary:

The active listing inventory decreased by 90 homes in the past couple of weeks, and now totals 5,877, a 2% drop. It officially reached a peak a month ago and is now slowly dropping. The inventory never reached 6,000 homes this year. Last year, there were 7,295 homes on the market, 1,418 more than today.

There are 41% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 20%. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly disappearing.

Demand, the number of pending sales over the prior month, increased by 55 homes in the past couple of weeks, and now totals 2,890. The average pending price is $844,699.

The average list price for all of Orange County remained at $1.6 million. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.

For homes priced below $750,000, the market is HOT with an expected market time of just 39 days. This range represents 39% of the active inventory and 62% of demand.

For homes priced between $750,000 and $1 million, the expected market time is 56 days, a hot seller’s market (less than 60 days). This range represents 18% of the active inventory and 19% of demand.

For homes priced between $1 million to $1.25 million, the expected market time is 81, a tepid seller’s market with very little appreciation.

For luxury homes priced between $1.25 million and $1.5 million, the expected market time increased from 101 days to 110. For homes priced between $1.5 million to $2 million, the expected market time decreased from 135 to 130 days. For luxury homes priced above $2 million, the expected market time decreased from 280 to 278 days.

The luxury end, all homes above $1.25 million, accounts for 36% of the inventory and only 13% of demand.

The expected market time for all homes in Orange County dropped in the past couple of weeks from 63 days to 61 days, a tepid seller’s market (60 to 90 days). From here, we can expect the market time to slowly rise as housing transitions into the Autumn Market.

Distressed homes, both short sales and foreclosures combined, make up only 1.5% of all listings and 2.3% of demand. There are only 31 foreclosures and 57 short sales available to purchase today in all of Orange County, that’s 88 total distressed homes on the active market, identical to two weeks ago. Last year there were 130 total distressed sales, 47% more than today.

There were 2,766 closed sales in July, a 14% drop over June 2017 and a 1.9% decrease over July 2016. The sales to list price ratio was 98.2% for all of Orange County. Foreclosures accounted for just 0.8% of all closed sales and short sales accounted for 0.8%. That means that 98.4% of all sales were good ol’ fashioned equity sellers.

Orange County Housing Report: A Mid-Year Checkup

Buyers and sellers often rely on the price per square foot as a way to determine the value of a home, but it is just not accurate.

Orange County Housing Report August 4th, 2017

Price Per Square Foot: Do not rely on the price per square foot as a reliable method to determine a home’s value.
Everybody is looking for a shortcut in establishing the value of a home. Online home valuation tools are now everywhere, Zillow being the most popular. They simply are not accurate. If you can find the fine print and have a math degree to determine what in the world they are saying, these tools are merely approximations of value and frequently have significant errors. If going online and plugging in an address does not work, what about utilizing the price per square foot to secure the value of a home? Unfortunately, it too is just another unreliable shortcut.

The average price per square foot varies from city to city, neighborhood to neighborhood, street to street, and even home to home. For all of Orange County, the price per square foot in June was $440. In May, it was $459. No, there was not a 4% drop in value from May to June. Instead, it illustrates that this data point cannot be relied upon to determine the value of a home. Just as the median sales price is a poor indicator of the precise increase or decrease in value, the price per square foot is unquestionably as unreliable.

Applying the average price per square foot to different sized homes to determine the value results in a major error in comparing it to the true average sales price. In Orange County, a 3,000 square foot home comes close but is still $29,000 off, a 2% error. In breaking it down by the city, the severity of the errors is similar. In Mission Viejo, for example, there is quite a discrepancy in both the low end and the higher end. In Newport Beach, prices vary considerably for smaller sized homes.

Overall, the price per square foot should not be used to isolate the true value of a home. It can be used, over time, as a gauge to determine which direction home values are moving. Some months it is up, and other months it is down. Yet, over the course of a year, the values will start to paint a picture that illustrates the direction of the market.

So, why can’t the price per square foot be used to zero in on the value of a home? There are way too many nuances that go into the Fair Market Value of a home. The number of bedrooms and bathrooms, lot size, usable lot, square footage, location, pool, spa, upgrades, amenities, condition, main floor bedroom, number of stories, school zone, privacy, architecture, floor plan design, view, garages, street parking, proximity to the beach, and so on, all determine a home’s value. Does the home back to a busy street? Is it located on a cul-de-sac that has homes on only one side of the street? Is there street noise? The list of questions goes on and on.

Square footage alone cannot determine if a home has been updated, upgraded, or is in turnkey condition. For example, four of the exact same Madrid Del Lago single level plans sold in Mission Viejo over the past 90-days, all 2,133 square feet. The sold prices varied from $838,000 ($392 per square foot) to $997,500 ($468 per square foot), a $159,500 difference. Quite obviously, square footage alone does not provide enough information to arrive at the price of a home.

Professional REALTORS® and appraisers take a home and compare it to similar pending and recently sold homes, adjusting the value up and down based upon all of the differences. The price per square foot is not really a factor. There are no shortcuts. The market analysis that professionals prepare is by far the most accurate method for determining the value of a home.

Active Inventory: The active inventory may have already peaked after declining by 16 homes in the past couple of weeks.
The active listing inventory shed 16 homes and now sits at 5,967, the first drop since the end of January. Sixteen homes may not be a lot, but it illustrates how the active inventory is having a real hard time pushing past the 6,000 home mark. And, it looks as if that is not going to occur at all this year. Typically, the inventory peaks around mid-August, but not this year. The theme for 2017 has been fewer homeowners listing their homes for sale. There have been 10% fewer homes to come on the market over the past month, and 7% fewer overall this year. As a result, it looks as if the Orange County active inventory may have already peaked, a bit early.

Last year at this time, there were 7,317 homes on the market, 1,350 additional homes or 23% more than today.

Demand: Demand increased by 5 pending sales in the past couple of weeks.
Demand, the number of homes placed into escrow within the prior month, increased by 5 pending sales in the past two-weeks and now totals 2,835, nearly the same. Demand is up year over year in every price range except the entry-level market, homes priced below $500,000. With 39% fewer homes available below $500,000 compared to this time last year, predictably, demand is off by 19% year over year.

Last year at this time, there were 31 additional pending sales, totaling 2,866. The current expected market time remained the same over the past couple of weeks at 63 days, a much hotter market than last year’s 77 days. At 63 days, the market is no longer a HOT seller’s market, but a tepid seller’s market with muted appreciation.

Luxury End: Luxury demand increased by 13% in the past couple of weeks and the inventory fell by 1%.
In the past two weeks, demand for homes above $1.25 million increased from 329 to 373 pending sales, a 13% rise, the highest level since mid-May. The luxury home inventory decreased from 2,089 homes to 2,065, down 1%. This surge has been isolated to homes between $1.25 million and $2 million.

For homes priced between $1.25 million and $1.5 million, the expected market time decreased from 123 to 101 days. For homes priced between $1.5 million to $2 million, the expected market time dropped from 176 to 135 days. In addition, for homes priced above $2 million, the expected market time increased from 269 days to 280 days. At 269 days, a seller would be looking at placing their home into escrow around the beginning of May of next year.

Orange County Housing Market Summary:

The active listing inventory decreased by 16 homes in the past couple of weeks and now totals 5,967, nearly the same. The inventory is having a real issue reaching 6,000 homes this year and may have already peaked a couple of weeks ago. Last year, there were 7,317 homes on the market, 1,350 more than today.

There are 39% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 19%. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly disappearing.

Demand, the number of pending sales over the prior month, increased by five homes in the past couple of weeks, and now totals 2,835. The average pending price is $842,718.

The average list price for all of Orange County remained at $1.6 million. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.

For homes priced below $750,000, the market is HOT with an expected market time of just 40 days. This range represents 39% of the active inventory and 62% of demand.

For homes priced between $750,000 and $1 million, the expected market time is 59 days, a hot seller’s market (less than 60 days). This range represents 18% of the active inventory and 19% of demand.

For homes priced between $1 million to $1.25 million, the expected market time is at 94 days, a balanced market that does not favor a buyer or seller.

For luxury homes priced between $1.25 million and $1.5 million, the expected market time decreased from 123 to 101 days. For homes priced between $1.5 million to $2 million, the expected market time decreased from 176 to 135 days. For luxury homes priced above $2 million, the expected market time increased from 269 to 280 days.

The luxury end, all homes above $1.25 million, accounts for 35% of the inventory and only 13% of demand.

The expected market time for all homes in Orange County remained the same over the past couple of weeks at 63 days, a tepid seller’s market (60 to 90 days). From here, we can expect the market time to slowly rise throughout the Summer Market.

Distressed homes, both short sales and foreclosures combined, make up only 1.5% of all listings and 2% of demand. There are only 32 foreclosures and 58 short sales available to purchase today in all of Orange County, that’s 88 total distressed homes on the active market, one more than two weeks ago. Last year there were 136 total distressed sales, 54% more than today.

There were 3,229 closed sales in June, a 3% increase over May 2017 and a 3% increase over June 2016. The sales to list price ratio was 97.9% for all of Orange County. Foreclosures accounted for just 0.99% of all closed sales and short sales accounted for 0.87%. That means that 98% of all sales were good ol’ fashioned equity sellers.